I’ve Made My Last Mortgage Payment. Now What Happens?

After years of work, you’ve finally made your last mortgage payment, jumped for joy and popped the Champagne. Congratulations! It’s a big accomplishment – but don’t forget to wrap up all the loose ends.

The first step is to start watching the mailbox for your cancelled mortgage documents. These documents prove that you own your home free and clear. Some homeowners are so excited to receive their mortgage payoff documents that they have them framed!

What should you get in that envelope? That depends on the type of loan you have.

If your loan is a standard 15- or 30-year fixed-rate mortgage you should receive:

A letter telling you that you’ve paid your mortgage in full

The original note. This is a document you signed that gives the holder of that note the right to collect money under the loan. One lender can transfer the note to another lender, who can then collect payments from you.

The mortgage document you signed

The note and mortgage document should both be stamped “canceled” when they’re returned to you.

If you have a home equity line of credit on your loan, however, you won’t get anything back from the lender because you’ve still got that line of credit you can draw on in the future. You can, however, tell the lender you want to close your line of credit. In that case, you’ll get all of your mortgage documents back.

Finally, the lender must release its lien on your property. Your lender will usually send a “Mortgage Release,” “Release of Deed of Trust” or a document by a similar name to your local recorder of deeds office. In some situations, the lender may send the lien release documents straight to you. If this happens, it’s up to you to take it to your local recorder of deeds office or other office where local real estate documents are filed and recorded.

Some lenders can be very slow in sending you the canceled note and mortgage document. If you don’t receive the documents, do a quick check of your credit report to make sure the lender is reporting that you no longer have an outstanding balance on the loan, then check with the recorder of deeds office to make sure the lien has been released. If both of these check out, you should be fine.

Finally, contact your homeowner’s insurance company and have the lender’s name removed as an additional insured from your policy. Now that you’ve paid off the loan, they no longer have a financial stake in the property and don’t need to be involved in any of your future insurance claims.